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Industry clusters power local economy

Regional economies, like San Diego’s, are the building blocks of U.S. competitiveness, and the foundation of these regional economies are industry clusters. Thirteen industry clusters—which are involved in producing everything from wireless technology and unmanned drones to craft beer and tortilla chips—power the San Diego regional economy, providing 27 percent of local employment, according to a report released Dec. 19 by SANDAG.

The report, Traded Industry Clusters in the San Diego Region, details how specialized industries generate 331,410 local jobs. Those jobs pay an average of $56,000 a year, $5,300 higher than the regional average. These traded industry clusters are export-oriented, selling goods or services outside the region and bringing in new money. The report provides a detailed breakdown and maps showing where industry cluster jobs are located. Data for the report are from 2008 through 2010, drawn from local, state, and private sources.

SANDAG and its partners have been studying industry clusters for more than two decades, developing an understanding of how these clusters raise productivity and are able to innovate more rapidly by bringing together technology, resources, information, and talent among companies, academic institutions, government, and other organizations. Industry clusters, as the term suggests, benefit from close proximity and tight linkages that yield better market insights, refined research agendas, larger pools of talent, and capital.

“Industry clusters continue to evolve in the San Diego region. Over time, some have grown, some have shrunk, and some have merged with others,” SANDAG Chief Economist Marney Cox said. “We keep a close eye on industry clusters because companies within clusters tend to be leaders in technology, research and development funding, patent awards, and other key indicators of innovation. They are crucial to helping the region attain and sustain a high standard of living.”

The smallest industry cluster in the region by employment is Specialty Foods and Microbreweries, with 1,717 jobs. However, the craft beer segment has seen substantial growth locally and nationally. According to the National Brewers Association, in 2010 the industry grew 11 percent by volume and 12 percent by revenue even while the overall volume of U.S. beer sales dropped by an estimated 1 percent. The San Diego region’s award-winning microbreweries are in the vanguard, producing more than 85,300 barrels of beer in 2010.

The region’s largest industry cluster is Entertainment and Hospitality, with 149,352 jobs. This cluster has the lowest annual average wage at $21,800. The highest paying cluster is Biotechnology and Pharmaceuticals, with an annual average wage of about $107,000.

Expanding to a point where it now warrants recognition as a cluster is Advanced Precision Manufacturing. This cluster acts as an innovation hub between other industry clusters by integrating state-of-the-art technologies with customized product development.

Other notable findings included in the report:

• Between 2008 and 2010, the height of the Great Recession, four clusters experienced growth: Biomedical Devices and Products (21%); Biotechnology and Pharmaceuticals (20%); Cleantech (9%); and Aerospace, Navigation, and Maritime Technology (4%).

• In the same period, eight clusters saw declines: Apparel Manufacturing (-13%); Horticulture (-11%); Publishing and Marketing (-11%); Fruits and Vegetables (-9%); Action Sports Manufacturing (-8%); Specialty Foods and Microbreweries (-7%); Advanced Precision Manufacturing
(-6%); and Information and Communications Technologies (-3%).

• The Entertainment and Hospitality cluster saw no change in employment.

• The Uniformed Military cluster (which is excluded from detailed analysis due to limited information) employs about 100,000 active duty personnel and 22,000 civilian staff, accounting for more than 8 percent of the region’s total employment.

• Venture capital funding in the region dropped after the start of the recession in December 2007. However, the region still receives about  $800 million in venture capital each year.

Project Manager(s)

For media inquiries, please contact the SANDAG Public Information Office at (619) 699-1950 or pio@sandag.org.